Sorry about that I should have phrased by post differently. Although it was posed as a political question, my real question has to do with economics.
Do we have a chance of a turn around, with the types of actions being made?
I shouldn't have questioned the motives.
Given a "free market" and some traditional stimulus (and some time) I think we would pull out of this quicker.
Quote:
Originally Posted by wind_magic
Appreciate your comments mdbee, but we try to keep the politics out of this thread so that people will stay on topic and people with all kinds of perspectives will feel free to post to the Market Crash thread. Make the same post over on Democrats vs. Republicans and I'm sure you'll get plenty of discussion.
There seems to be some issues with the recent good news of 3.5% increase in GDP. Ordinarily, these reports aren't looked at too closely, but since this one supposedly signals the end to the Great Recession, folks have been peeking under the hood so to speak, to see how the increase was calculated.
A few notable points have been raised:
I. Cash for Clunkers was both good and bad. Good for this quarter, but horrible going forward.
1.66% of the 3.5% GDP increase was attributed to 'Cash-for Clunkers'. This isn't a sustainable program and since it's already ended, we won't be seeing an increase going forward. However, this very same program has impacted another set of important numbers. The same GDP report tells us that Personal outlays increased $148.2 billion (5.8 percent) in the third quarter, compared with an increase of $8.2 billion (0.3 percent) in the second. Personal saving (disposable personal income less personal outlays) was $364.6 billion in the third quarter, compared with $533.1 billion in the second.
The personal saving rate was 3.3 percent in the third quarter, compared with 4.9 percent in the second. This had to be "cash for clunkers". Acquiring new debt is the worst sort of "spending" as you're replacing a paid-off car with one that now comes with a payment book.
II. Personal Income is collapsing: In short, less income, less savings, more taxes.
Gross personal income decreased $15.5 billion (0.5 percent) in the third quarter, in contrast to an increase of $19.1 billion (0.6 percent) in the second. At the same time, Personal current taxes increased $4.8 billion in the third quarter, while it decreased $119.1 billion in the second. In short, Taxes up, income down.
Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, instead of the increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent. Disposable personal income decreased in nominal terms by 5.9% while in real terms (inflation adjusted) it decreased by 7.2%.
Would someone explain to me how a decrease in purchasing power ends a recession?
III. Complete and utter confusion:
From Market ticker.com:
"Looking inside the data, the "big change" in private domestic investment is all residential fixed - up 23.4%. I don't believe it. I've been scouring the homebuilder earnings releases and data, and I don't see the numbers that support this. An improvement over the ditch-diving of the last many quarters, yes - but a 23.4% increase, a swing of fifty percent from Q2-Q3? Oh hell no. Where is it? It's not in Home Depot's or Lowe's quarterly results, it's not in the home builders, and I can't find it in the suppliers (lumber companies, etc) either. This sort of move would result in monstrous top-line revenue increases reported by firms in this sector and that simply has not happened.
Nor do the export and import numbers look right. Port of Long Beach and LA anyone? Those numbers also don't add up - swings of 20-25% in one quarter? Not reflected in container volumes and freight loadings. Yet it has to be - how do you get something in or out of here without it going through a port?"
So, GDP was up 3.5% ... maybe.... yet nothing in the report suggests a real recovery is underway as none of the gains are repeatable. How could they be? Consumer spending is 70% of the economy, yet we are still losing jobs. People without jobs can't buy anything.
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For the most part tropic Cat is right but as much as touting an increase in GDP partly based on governments infusion of dollars, pounds, euros etc as a recovery I really dont think a .7 % decrease in income or tax revenue is a collapse in income. I do think that this situation will take a few years for the mud to settle.
I doubt if the US will do what it takes to reduce debt anytime soon but I do think the issue has been finally been raised to high enough level that every future government will be forced to ever more deal with the debt as an issue. Perhaps one day the people will actually be able to change the system to disconnect the industry lobbies from the political structure and then you will be actually able to cut budgets. But on that important part of the solution I'm not going to hold my breath.
One other thing, I do think that folks with money parked in Money Market funds and hiding quivering in the corner have been missing wonderful money making opportunities. My portfolio is up 70% so far this ytd and including the losses from last fall I am still up 43% since August of last year. Sitting back making no money on MMF's is just a complete waste of a hell of an opportunity.
Last edited by kootenay : 2 Weeks Ago at 01:16 AM.
Reason: spelling
They may be awful but not suprising. One would expect that after the experience of last fall that both unemployment and consequently revenue would fall. This will take a few years to play out. In the mean time there is still lots of opportunity.
17.5% of the people in our country (at least) are unemployed. I would suspect the real unemployed AND underemployed number at well over 20%.
With those numbers, that means that at least 1:5 people are not buying anything that is not mandatory for survival. Yet, these companies are showing profits? The stock market is over 10,000? Talk about a disconnect!!! How do you show a profit when 1 out of 5 people (at least) is not buying your product? I tell you how: you fire employees and cut back on everything and everyone. Of course, that can only get you so far. After a while, productivity can no longer rise and you might se it fall exponentially. Coupled with that will be the continued lack (if not growing lack) of people to buy your products.
I am still squarely in the double-dip corner. And I sure feel for the people who are unemplyed because I doubt it will get better any time soon.
My opinions.
Brian
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This is an article from the Globe and Mail's Globe investor web site. Its a subscription service so I will post the entire article. It short but cant post a link. It will give you an idea as to what is going on in the Great white north.
Quote:
Canada's job market in deep freeze
More than 43,000 Canadian jobs vanished in October, suggesting that after two consecutive months of gains, companies are waiting for more signs of a sustained recovery before they begin hiring again.
Canada's unemployment rate rose to 8.6 per cent, up from 8.4 per cent a month earlier, and a continued trend to self-employment shows the cold job market is forcing many to create their own work.
But behind the bleak headline number that was released by Statistics Canada Friday, there is a subtle shift in the wind.
The economy has now added full-time jobs for two months in a row as part-time work receded, suggesting there are at least some signs of optimism. Also, higher-paying jobs were created in October in areas such as construction, while positions were shed in the lower-paying retail sector.
“The details of the report were mostly weaker, with the only positive news that the entire drop was in part-time jobs, while full-time positions recorded a decent gain,” Benjamin Reitzes, an economist at BMO Nesbitt Burns, said Friday.
Like I said it will take time for this to play out. But we are going to have to look beyond the headline for the real indicators.
Last edited by kootenay : 2 Weeks Ago at 09:15 PM.
I brought on an HR consultant a couple of years ago. One of her responsibilities is providing hiring services for our clients. For the last 90 days or so we have had an influx of hiring request. My clients are beginning to hire a wide range of employees and we are starting to get many new clients wanting our hiring services. Ironically this started as a service available to help clients and now is turning into a solid revenue stream.
Why are these people hiring? Many cut back dramatically last year out of panic and survival. Some people use the opportunity to let go marginal employees. They are now beginning to feel thins are under control and that has led to hiring and or replacing those that are gone.
